10 Stocks to watch in 2020

10 Stocks to watch in 2020

BY DURRANT PATE
Observer business writer
editorial@jamaicaobserver.com

Friday, January 03, 2020

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The Jamaica Stock Exchange (JSE) has been making waves throughout the investing world with the index being among the top four for last year, having secured the number one spot in 2018. The performance of the market is indicative of the growth experienced in those companies, whose stocks are traded on the exchange.

For the most part companies this year — like they did last year — saw improvement in their stock price rather than decline. This emphasises the confidence the Jamaican investing public have with listed companies.

Up to December 17 the JSE increased its total listing to 122, with 78 securities listed on the Main Market and 44 on the Junior Market. The market is set to continue its positive performance particularly given the growing number of companies both private and government owned, which have indicated an interest in going public and have its shares listed on the JSE this year.

The 10 stocks to watch are not just based on profitable expectation, but also optimism about under-performance last year where action was taken and should result in fruition this year. The list includes one particular company, which hasn't yet been listed, but the market is eagerly anticipating its IPO.

While the list includes some of the blue chip companies, focus has been taken on some recently listed companies, which have done well and the prospects seem bright, worthy of note in 2020.

We sought to strike a delicate balance between blue chip companies, start-up companies and those in the mid-range.

1 TRANSJAMAICA HIGHWAY

TransJamaica Highway is my first stock to watch for 2020. The stock isn't actually listed yet because the initial public offer (IPO), which was anticipated for year-end, is now scheduled to take place later this month.

The Jamaican investing public is eagerly expecting this IPO to be the largest one in Jamaica's history. It could reach as high as $10 billion, surpassing Wisynco Group which offered 20 per cent of the company to raise $6.1 billion.

Finance Minister Nigel Clarke set a target to have 90,000 investors subscribing to the IPO. It has been suggested that the price could be lower than the $0.50 Wigton IPO so as to enable more Jamaicans to afford share purchase.

TransJamaica has a 35-year concession for the Highway 2000 east-west toll corridor between Kingston and May Pen, Clarendon with connections to Spanish Town and Portmore.

2 BARITA INVESTMENTS

This company might be relatively small in comparison to many other listed companies, but its profitability growth has far exceeded most, which makes it stand out and a close watch for 2020.

If Barita continues its profitability train into 2020, shareholders will be singing all the way to the bank. Its 2019 annual report shows total comprehensive income for the year was $1.94 billion, up from $686 million.

Net profit, despite increased expenses, rose to $1.7 billion, up from $363 million the year before.

Operating income tripled to $3.9 billion, up from $1.3 billion the year before. In its report for the nine-month period ended June 30, Barita boasted that net profits increased by a massive 670.7 per cent for the period.

Barita raised $4 billion in a rights issue in March last year.

3 SAGICOR GROUP JAMAICA

Sagicor Group Jamaica is in expansion mode having made a number of innovative moves throughout the year. This included launching Jamaica's first two exchange traded funds — one for the financial sector and the other for manufacturing and distribution.

In addition, Sagicor successfully completed on September 30 the sale of Advantage General Insurance Company from NCB. This acquisition further increases its dominance in Jamaican's insurance market.

Sagicor raked in after-tax net profits of $10.9 billion for its third quarter, representing a 23 per cent increase over the net profits of $8.9 billion last year.

As such it is hard not to put the regional insurance giant on the watch list for 2020.

Sagicor CEO Chris Zacca believes the company can only get better in 2020, and I believe him too.

4 MAILPAC

The Mailpac Group, which is one of the newest company on the JSE, saw its share price jump from $1.00 per share to $2.22 during the first trading day two weeks ago. Investment expert John Jackson had predicted that the stock price would jump based on market demand.

The Mailpac Group is the largest e-commerce company, with 11 locations islandwide. Mailpac Group facilitates online shopping and shipment to Jamaica by offering clients a US shipping/mailing address.

Given the huge business prospects for this company, investors are closely watching if profitability will justify investor confidence that resulted in the spike in share price.

The Mailpac Group, through its recent IPO of shares on the junior market, has managed to raise $495 million – a record-breaking total, creating a first in the history of the junior market.

The $495 million raised by Mailpac increased the total capital raised by companies listed on the junior market to $11.7 billion, fulfilling one of the entity's main objectives of enabling access to equity capital.

5 NCB

NCB is always a stock to watch given its consistent growth and dominance in Jamaica's finance sector. As Jamaica's top banking conglomerate, NCB Financial Group plans to enter into new markets as part of its five-year growth aspirations, giving confidence that this is definitely a stock to watch for 2020.

The bank, which has been growing through acquisition, racked up another year of record profit for 2019. This performance has pushed the stock to new highs. NCB recorded a new profit high of $30.7 billion or $12.18 per share. That's up 7.3 per cent from last year's $28.6 billion of earnings.

The downside in the results was NCB's key commercial banking segment, which recorded a net loss due to credit impairments that topped $4 billion.

NCB Financial wants to cement itself as the regional financial powerhouse. NCB Chairman Patrick Hylton listed the pillars of his new 2024 target, which include strong financial performance, strong organisational health, delighted customers and digital banking.

6 GRACEKENNEDY

GraceKennedy is another of those stocks which is a traditional performer and provides good to modest returns for stockholders. Its positive financial performance for this year is to continue into 2020.

In releasing its results for the period ended September 30, 2019, GraceKennedy Group reported improved performance, with profit before tax amounting to $277 million or 17 per cent higher than the corresponding period of 2018.

For the nine-month period profit before other income was $2.88 billion, which was 30.2 per cent higher or $668.1 million more than last year. This is indicative of an improved operating margin.

The group achieved revenues of $77.03 billion, representing an increase of 4.3 per cent or $3.20 billion over the corresponding period of 2018.

7 FIRST ROCK

Regional investment outfit, First Rock Capital Holdings is making waves in the real estate and investment market in the region. Having successfully secured a $2-billion private placement in January last year with the funds now fully deployed in investment opportunities throughout the region, First Rock is seeking to raise upwards of US$12.32 million in an IPO.

First Rock is a start-up company which is going somewhere and is to be watched for the future. The two-year-old company is being led by some bright, relatively young business professionals who command the attention of those with capital and assets. So if you follow the money, you will be following First Rock

First Rock Capital Holdings is an international business company incorporated under the laws of St Lucia. The company invests primarily in real estate assets including income-generating investment properties, development projects (greenfield and brownfield), real estate-linked financial instruments, and opportunistic private equity investments.

8 EPPLEY

Regional real estate outfit, Eppley Caribbean Property Fund has announced a buy-back of its shares on the open market. This buy-back will be taking place over a period of weeks and months in 2020.

The move comes as the directors of the company contend that the shares, which are traded on both the Jamaica and Barbados stock exchanges, are way below their true value. Eppley said the buy-back is taking place in accordance with its existing Share Buyback Policy, which was previously announced,

With a number of acquisitions that took place in 2018 and 2019, Eppley Caribbean Property Fund experienced an about-turn in its financial performance for financial year 2018/19. For the year ended September 30, 2019, the company recorded its most profitable performance since its inception in 2013 and experienced significant improvements in all key financial performance metrics.

9 KEY INSURANCE

Key Insurance is one of those companies that have not done well in 2019 but for which the prospects of coming out profitable in 2020 seem possible, given the turnaround strategy that has been put in place. They have made the 2020 watch list not because of expected profitability but for the expected results of the turnaround strategy.

10 GWEST

So too is GWest, the medical and real estate outfit in Montego Bay, which has not only implemented a turnaround strategy but also put in place a new team to do so, having replaced two CEOs last year. Nothing but the best is good for the investors.


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